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Public Real Estate Management: Estonian Case Study with Monte Carlo SimulationAnalyses
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management.
2014 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

With accumulation of sovereign debt in many large OECD countries it seems that attention is

heightened on how to manage public resources more effectively. High levels of sovereign

debt are partly related to the aftermath of the latest financial crisis, where resolution for many

big economies was to intervene and use public resources to put an end to the expansion of the


Public real estate is one of those resources, which’s efficient management has high

importance on general public sector efficacy. It seems that governments around the world

have a way to go toward efficiency in public real estate management. There seem to be rather

wide differences in management practices and quality.

This thesis is an attempt to quantify some choices Estonian government could take in terms of

its public real estate management. Four different scenarios are compared and Monte Carlo

Simulation tool is used for that purpose. Two of the scenarios are related to private sector

involvement and two are not. Privatization of public assets does not only mean cashing out for

the government. It has wider consequences by introducing market forces where they weren’t


One of the most important points of interest in this thesis is what effect can market forces and

change in incentives have on public real estate management. There can be both, positive and

negative effects, but which ones would prevail? The model built during the process of the

thesis tries to measure those effects with aggregate net present value and its volatility by

looking at 30 years ahead.

Simulation analyses is used to vary input variables in the range that seems to be supported by

the observations made in the literature and in some cases, where data is not available, also

according to more subjective view that of the author’s. As input and their characteristics are

different for scenarios, it is of interest to document how do the main outputs, mean NPV and

its volatility, vary along with inputs.

Place, publisher, year, edition, pages
Keyword [en]
public real estate management, incentives, Monte Carlo Simulation analyses, securitization, sale & leaseback, agency theory, status quo bias.
National Category
Engineering and Technology
URN: urn:nbn:se:kth:diva-147307OAI: diva2:729231
Available from: 2014-06-25 Created: 2014-06-25 Last updated: 2014-06-25Bibliographically approved

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